Hourly workers in half of the states will see minimum wage increases in 2024, and financial analysts predict the raises will kill more service industry jobs with automation.
Among the 25 states raising rates next year, 22 will implement the changes on Jan. 1, with three going up to at least $16 an hour in base pay: California, New York and Washington. Nevada and Oregon will increase their base rates on July 1, followed by Florida on Sept. 30.
The left-leaning Economic Policy Institute estimated Thursday that the Jan. 1 increases will boost pay by $6.95 billion for 9.9 million workers.
Such increases are “essential” as long as the federal minimum wage remains stagnant at $7.25 an hour in the face of high inflation, said Holly Sklar, CEO of the advocacy group Business for a Fair Minimum Wage.
“Unfortunately, federal minimum wage increases have been too little, too late in recent decades and [have] fallen further and further behind the cost of living,” Ms. Sklar added.
Brian Marks, an economist who teaches business analytics at the University of New Haven, said the hikes will put “some downward pressure” on hiring.
“Firms will not only look to reduce labor hiring but to change the nature of their business to use more self-checkout and automated self-service,” Mr. Marks told The Washington Times. “It’s already happened in the grocery store industry and it’s moving on to other industries.”
However, he said the raises won’t increase unemployment due to a tight labor market. He said they also won’t add much to inflation since many restaurants and retailers have already implemented forward-looking price increases disguised as “service fees.”
The national unemployment rate hit 3.7% in November, below the Federal Reserve target rate of 4% to 6%. It has hovered between 3% and 4% since 2021, when many service workers returned from pandemic lockdown furloughs.
Although inflation has cooled from its 40-year high at the height of the pandemic, the cost of groceries, rent and other goods and services remains elevated from 2019. The U.S. inflation rate hit 3.14% last month — well above the Fed’s target of 2%.
Workers in 20 states still earn the federal minimum of $7.25, which Congress hasn’t raised since 2009. Those states are primarily in the Midwest and South — including Louisiana, Texas and Wisconsin.
A bill sponsored by Sen. Bernard Sanders, Vermont independent, would raise the federal minimum wage to $17 an hour. If signed into law, the Congressional Budget Office estimates this increase would eliminate 700,000 jobs to boost the pay of millions of workers.
Hiking the minimum wage also raises the bar for unskilled workers to find jobs, said Walter Block, an economist who teaches at Loyola University New Orleans.
“It mandates that anyone with a productivity level below that stipulated by law will be unemployable,” Mr. Block said.
“If the law requires a wage of $10 per hour, and your productivity is only $7 hourly, then any firm foolish enough to hire you will lose $3 every 60 minutes,” he added. “Either they will not hire you or they will go broke if they do that once too often.”
Washington, which ties annual increases to inflation, will have the highest state minimum in the country as it increases from $15.74 to $16.28 an hour on New Year’s Day. New York will go up to $16.
California, the largest and most prosperous state, will raise its hourly minimum from $15.50 to $16. A law passed in April will make employers pay fast food workers even more — at least $20 an hour.
“No doubt automation will replace workers who are too expensive for a given business,” said Michael Warder, a California-based business consultant and former vice chancellor at Pepperdine University. “Other businesses may choose to move out of state. Customers may shop elsewhere.”
Sean Higgins, an analyst at the libertarian Competitive Enterprise Institute, said many food and hospitality workers already earn more than their state minimum. He noted that employers have raised salaries to compete for a shrinking pool of applicants.
“Raising state and local rates does hurt the smaller businesses, the classic mom and pop enterprises, who will employ local high school or college-age kids if they can but may not be able to justify that if the minimum rate increases,” Mr. Higgins said.
In Maryland, Democratic Gov. Wes Moore has signed a law that will increase the state minimum wage to $15 an hour for all employers on Jan. 1. That same day, New Jersey will increase its rate to $15.13 and Connecticut will go up to $15.69.
On July 1, Oregon and the District of Columbia will announce hikes tied to annual cost-of-living increases. Nevada will go up to $12 an hour that same day, and Florida will raise its hourly minimum to $13 in September.
According to the Economic Policy Institute, 38 cities and counties will raise their minimum wages above state rates on Jan. 1.
The minimum wage in the District of Columbia is currently $17 an hour — not far behind West Hollywood, California, which led the nation at $19.08 an hour this year.
Although the hikes will affect millions of workers in 2024, most will see no change in their paychecks.
Leisure and hospitality workers earned an average hourly salary of $21.55 last month, up from 21.42 in October and $20.61 in November 2022, according to the Bureau of Labor Statistics.
That makes most state minimum wage laws an exercise in “virtue signaling” by elected officials looking to “score political points” by manipulating the market, said Andrew Crapuchettes, CEO of RedBalloon, an Idaho-based job recruitment agency.
“The tightness of the labor market makes it difficult to hire, so supply and demand will already be a more significant driver of wage rates,” Mr. Crapuchettes told The Times. “While the impact of these minimum wage laws will be slight, it will produce fewer job opportunities and get additional cash to very few workers.”
• Sean Salai can be reached at ssalai@washingtontimes.com.
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